How to Plan your retirement early with Mutual Funds?

Retirement is the second inning of your life. It’s a time, you have fulfilled all your responsibilities and get a time to do what you truly wanted. However, the main challenges you may face in your retirement age will be financial in nature.

Income after retirement is not same as when you were working. In fact, sometimes it’s not regular if you do not receive a hefty pension. Therefore, you need to plan your retirement as early as possible to avoid stress in the future. 

How much do you really need? 

Consider this: With an average inflation rate of 6% in India over the last decade, if you need Rs.20,000 for basic monthly expenses today, you will need ~Rs.1,15,000 a month after 30 years. This excludes the emergency and discretionary expenses that you may incur. Hence, it is mandatory to plan your retirement wisely and start It when you are young. Saving early will help to achieve your goals and you can enjoy the benefit of compounding, which is earning a return on already accumulated returns. Set a clear retirement goals when you start working and develop a discipline to invest on a timely manner. 

Mutual Funds Investment for Retirement Planning

Retirement planning is a long-term journey. Hence, investing in Mutual funds can be the ideal option. With mutual fund investment, you can get an exposure to a different asset classes such as equities, debt, gold, etf, etc. You need to diversify your investment portfolio & rebalance it regularly to beat inflation and create wealth over the long term. All you need to do is select the best mutual fund to suitable to your risk profile. Compared to traditional investment options for retirement such as pension plans, Mutual funds offer the flexibility of full or partial withdrawal in unfavourable circumstances, subject to the lock-in period.

To invest in mutual funds,, you can select either lumpsum investment or systematic investment plan (SIP). Compared to lumpsum, SIP is more disciplined approach where you can choose the amount to invest on a timely manner. In fact, as your salary increases, you can decide to increase the amount with the top up SIP facility. With SIP, you can get the advantage of rupee-cost averaging. Long-term investments in mutual funds offer your investments more time for compounding.

There are many mutual fund houses which have dedicated retirement funds which provides a better solution to achieve your retirement goals. They have lock in period of 5 years or retirement age, whichever is early. It helps to separate the retirement money from your other investments. These retirement funds are usually hybrid, that is, they invest in a mix of equity, debt, and money market instruments. You can select a suitable plan based on your requirement and goals. 

Some of these funds even come with a trigger option, which helps you to automatically shift your investment to another plan (with a more conservative asset allocation) as you grow older. Hence, by changing the equity-debt mix, you can better protect your retirement corpus. Moreover, with systematic withdrawal plan (SWP), you can even easily withdraw a fixed amount from your mutual funds regularly.

Retirement planning is one of the important life goal that is often ignored when you are young. Understand the importance of building money for your retirement and start investing to achieve your retirement goals to enjoy a stress-free retirement life. 

Plan your retirement with mutual fund investment today. It’s never too early to begin!